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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Go to Stockholm, and not a step back! Do you hear us?

The Day asked experts to put markers into the prime minister’s June 3 statement on the progress of gas talks with Russia
5 June, 2014 - 11:55
PRIME MINISTER ARSENII YATSENIUK WILL REPORT TO THE VERKHOVNA RADA ONCE MORE DURING A GOVERNMENT QUESTION HOUR ON JUNE 6 / Photo by Mykola TYMCHENKO, The Day

On June 3, Prime Minister of Ukraine Arsenii Yatseniuk made a statement to the parliament on the progress of gas talks with Russia. If we discard his usual bold phrases, which he generously seasons his assessments of the Kremlin and Gazprom with (“Ukraine is not a cash cow, and we will not pay 500 dollars for gas,” “Russia is stealing our gas” and so on) and which the Ukrainian mass media are so fond of quoting, the prime minister’s report included two key signals that have drawn The Day’s attention. The first is that the government has no clear plan to ensure energy security: they do not know what to do with the coal industry, how to reorganize the power industry, and finally, how to resolve the issues of tariffs and cushioning of vulnerable social groups from rising prices. Secondly, despite demonstrative openness of the government team on the issue of gas talks with Russia, they are still held in the backroom manner, which has already, unfortunately, become traditional... This is confirmed by a number of points noticed by The Day’s experts whose comments are published below.

Yurii KOROLCHUK, member of the board of the Institute of Energy Research:

“I partly understand the position of the Ukrainian government. But I have no explanation why they are first saying that we will go to the Stockholm Arbitration Institute, and then backing away from it.

“They have not actually decided anything. Everything was agreed back on May 26: Ukraine pays its debts, and only then concrete negotiations on the gas price will start.

“Ukraine must not back away from going to Stockholm now. The gas supply contract is valid until 2019. Who knows what will happen over the five intervening years? Will there be an early election, will there be a new president, whether we will see a new Maidan? What if there will be some trouble and we will be back to having gas debts? ‘Bargain gas price’ is not an option anymore. 2011 was the deadline to sue Gazprom on the gas price. We would have a result already had we spent these two years in litigation. We are just marking time meanwhile. If we do not file a lawsuit even now, but keep playing at the talks with Russia, then this ‘tango’ will be prolonged for at least a year, and then there will be no point in going to arbitration at all. Russia is actually working to make it happen. Ukraine, however, does not need to buy into it.

“Basically, I understand why the government has slowed down on the issue. Russia would have really stopped gas flows had they not. To prevent it, we had to pay off all debts and start paying 485 dollars per 1,000 cubic meters. To do it, we need money. Europe obviously did its sums, coming to more than 5 billion dollars, and gave a red light saying: ‘negotiate so that we have no problems getting the gas.’

“I, by the way, do not like how Yatseniuk, Prodan, and Koboliev are easily making momentous statements. I have learned from my Polish friends, who also filed a lawsuit in Stockholm, that such statements are not going to work. When the Polish arbitration started, they were told to submit to the tribunal all public statements, everything related to gas prices. They sent all interviews there. I am not a lawyer, but often communicate with lawyers and they say that it is a special court. It draws on a variety of evidence, including witness testimony. When the Poles were at it, they even wanted to bring European companies to testify. Of course, they refused, but they had their chance. What could they get from a conflict with Gazprom? For us to have help, we need to show not emotion and populist statements, but rather clear and consistent, balanced position.

“As for restructuring Naftohaz, I was honestly surprised by the prime minister’s statement on dividing the company into gas storage and gas transportation divisions, which he labeled as a requirement of the European Energy Community. There is no such requirement. They required dividing extraction of gas and its transit, because there is a principle that a transit company’s owner cannot own the resource, too. Therefore, from Yatseniuk’s statement, I make unfavorable findings on the likely purpose of Naftohaz’s restructuring. Some people will get all the profits, others all the losses. Who will be who, we will see. It is clear, however, that they plan to split the company between Europe and Russia. They will try to present it as something better, but the essence of the matter will not change.”

Stanislav BATRYN, lawyer, director of the law firm Lions Litigate:

“To my best knowledge, there has been no final decision made by Ukraine on filing a suit with the Stockholm Arbitration Institute. It is our right and we will use it, if an agreement with Russia is not reached. I would note that today we have achieved a certain result: the Russians were talking about 485 dollars per 1,000 cubic meters lately, but today they are quietly talking about 350-380 dollars. It is still important that Ukraine continue to slars. Why? We see that Europe is now agreeing with Russia. They talk about the price band of 350-380 dollars as a victory. However, the price that is offered today at 370 dollars will damage Ukraine. We will recover the price we need in Stockholm.

“Vladimir Putin does not need a defeat in Stockholm which will lead to him losing face, so they will try to have an out-of-court settlement. Ukraine, on the other hand, is very much needing a court victory. In court, we will become a separate party to the talks and a strong state on the continent. Europe does not want it. It wants to resolve the situation in a day, but we do not have to have any regard for such interests of Europe, and especially the commercial interests of some businesses. Should we choose to litigate in Stockholm for a year of two, it will mean that we have become a strong state defending its rights and interests, rather than one in which politicians engage in backroom negotiations.

“Going to Stockholm will bring us a big political win that will last us years. I assure you as a lawyer that after the arbitration starts, we will still have hundreds of windows for a settlement if it ever becomes really necessary. Do not rush to handshakes before June 9.”

By Alla DUBROVYK, Maria YUZYCH, The Day
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